Securities Law & Instruments

Headnote

NP 11-203 -- Process for Exemptive Relief Application in Multiple Jurisdictions -- Relief granted from seed capital requirements for commodity pools in NI 81-104 -- Manager permitted to redeem $50,000 seed capital investment in each Pool provided that each Pool has received subscriptions from investors other than the Manager totalling at least $5.0 million and provided the Manager maintains $100,000 working capital as required for investment fund manager under National Instrument 31-103 -- Registration Requirements and Exemptions -- National Instrument 81-104 -- Commodity Pools, section 3.2(2)(a).

Applicable Legislative Provisions

National Instrument 81-104 -- Commodity Pools, ss. 3.2(2)(a), 10.1.

National Instrument 31-103 -- Registration Requirements and Exemptions.

October 21, 2010

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(The Jurisdiction)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

ALPHAPRO MANAGEMENT INC.

(the Filer)

AND

IN THE MATTER OF

HORIZONS ALPHAPRO GARTMAN ETF,

HORIZONS ALPHAPRO SEASONAL ROTATION

ETF, HORIZONS ALPHAPRO S&P/TSX 60 130/30™

ETF (the Existing ETFs)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Existing ETFs, and such other exchange-traded funds (each a Future ETF, and collectively with the Existing ETFs, the Pools) that the Filer or an affiliate of the Filer may establish in the future, for a decision under the securities legislation of the Jurisdiction (the Legislation) for exemptive relief from Section 3.2(2)(a) of National Instrument 81-104 -- Commodity Pools (NI 81-104) to permit a commodity pool to redeem the required initial investment of $50,000 (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 -- Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut.

Interpretation

Terms defined in National Instrument 14-101 -- Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Basket means in relation to a particular Pool, a group of securities that may be determined by the Filer, or an affiliate of the Filer from time to time for the purpose of subscription orders, exchanges or redemptions or for other purposes.

Dealers means registered dealers (that may or may not be Designated Brokers) that have entered into dealer agreements with the manager of a Pool, on behalf of the Pool, pursuant to which the Dealer may subscribe for and purchase Units from the Pools, and Dealer means any one of them.

Designated Brokers means registered brokers and dealers that enter into agreements with the Pools to perform certain duties in relation to the Pools, and Designated Broker means any one of them.

JovInvestment means JovInvestment Management Inc., the investment manager of the Existing ETFs.

NI 31-103 means National Instrument 31-103 -- Registration Requirements and Exemptions.

NI 81-102 means National Instrument 81-102 -- Mutual Funds.

Pools means the Existing ETFs and any Future ETFs.

Prescribed Number of Units means, in relation to a Pool, the number of units of the Pool determined by the Filer (or an affiliate of the Filer) from time to time for the purpose of subscription orders, exchanges, redemptions or for other purposes.

Units means the units of a Pool, and Unit means one of them;

Unitholder means holder of Units of a Pool.

Representations

This decision is based on the following facts represented by the Filer

1. Each Pool is, or will be, a mutual fund trust governed by the laws of Ontario and a reporting issuer under the laws of some or all of the provinces and territories of Canada.

2. Each Pool is, or will be, a commodity pool as such term is defined in section 1.1 of NI 81-104, in that each Pool has adopted or will adopt fundamental investment objectives that permit that Pool to use or invest in specified derivatives in a manner that is not permitted under NI 81-102.

3. Each Pool is, or will be, subject to NI 81-102, subject to any exemptions therefrom that may be granted by securities regulatory authorities and subject to the exemptions relating to commodity pools, as such exemptions are outlined in NI 81-104.

4. Each Pool will be, and will generally be described as, an exchange-traded fund.

5. Units of each Pool are or will be listed on the Toronto Stock Exchange (TSX). Units of a Pool will not be sold to investors until the TSX has approved the listing of Units of the Pool.

6. The Filer is a corporation incorporated under the laws of Canada, and the Filer, or an affiliate of the Filer acts, or will act as, the trustee and manager of each Pool.

7. JovInvestment, a corporation incorporated under the laws of Ontario, acts, or will act as, the investment manager of the Existing ETFs. It is anticipated that JovInvestment will also act as the investment manager of each Future ETF. JovInvestment is registered as a portfolio manager and exempt market dealer under the Securities Act (Ontario) and as a commodity trading manager under the Commodity Futures Act (Ontario).

8. Units may be subscribed for or purchased directly from the Pools by Dealers or Designated Brokers and orders may be placed for Units in the Prescribed Number of Units (or an integral multiple therof).

9. The Pools have or will appoint Designated Brokers to perform certain functions, which include standing in the market with a bid and ask price for Units of each Pool for the purpose of maintaining liquidity for Units.

10. Each Dealer or Designated Broker that subscribes for Units of a Pool will deliver, in respect of each Prescribed Number of Units to be issued, a Basket and/or cash in an amount sufficient so that the value of the Basket or cash delivered is equal to the net asset value (NAV) of the Units next determined following the receipt of the subscription order.

11. The NAV per Unit of a Pool will be calculated and published on the website of the Filer, or an affiliate of the Filer.

12. Neither the Dealers nor the Designated Brokers will receive any fees or commissions in connection with the issuance of Units to them. An affiliate of the Filer may, at its discretion, charge a redemption charge on the issuance of Units to the Designated Brokers or Dealers.

13. Except as described in paragraphs 8 through 10 above, Units may not be purchased directly from the Pools. Investors are generally expected to purchase Units through the facilities of the TSX.

14. Unitholders that wish to dispose of their Units may generally do so by selling their Units on the TSX, through a registered broker or dealer, subject only to customary brokerage commissions. A Unitholder that holds a Prescribed Number of Units or an integral multiple thereof of a Pool may exchange such Units with the Pool for Baskets and/or cash. Unitholders may also redeem their Units directly from a Pool for cash at a redemption price equal to 95% of the closing price of the Units on the TSX on the date of redemption.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:

1. the manager, portfolio adviser, promoter or sponsor of the applicable Pool (the "Seed Investor") may not redeem any of its initial investment of $50,000 in that Pool until $5.0 million has been received by the Pool from persons or companies other than the persons and companies referred to in Section 3.2(1)(a) of NI 81-104;

2. if, after the Seed Investor redeems its initial investment of $50,000 in a Pool in accordance with condition 1 above, the value of the Units subscribed for by investors other than the persons and companies referred to in paragraph 3.2(1)(a) of NI 81- 104 drops below $5.0 million for more than 30 consecutive days, the Seed Investor will, unless the Pool is in the process of being dissolved or terminated, reinvest $50,000 in the Pool and maintain that investment until condition 1 is again satisfied.

3. the manager of the applicable Pool will at all times comply with the applicable requirements of registration as an investment fund manager under National Instrument 31-103 -- Registration Requirements and Exemptions; and

4. the basis on which the Seed Investor may redeem any of its initial investment of $50,000 in a Pool will be disclosed in any future prospectus of the Pool.

"Darren McKall"
Assistant Manager, Investment Funds Branch
Ontario Securities Commission